Quantifi, a provider of risk, analytics and trading solutions has published a whitepaper that explores how, with the right technology, firms can achieve better results to get the most out of their liability-driven investment (LDI) strategy.
Liability-driven investment (LDI) is an approach to investment in which all or part of the strategy is designed to match a scheme’s future liabilities. From a risk management perspective, it aims to mitigate the interest rate and inflation risk related to the liabilities. To make the right matching and hedging decisions, firms need powerful, flexible risk and valuation technology.
“The key objective for life insurers, pension schemes and asset managers is to ensure there is sufficient cash flow to fund future payment obligations to clients. However, achieving this goal in a low-rate environment with increasing regulatory oversight and capital requirements is becoming ever more challenging. As a result, firms are turning to LDI strategies to more readily attain their funding target. An LDI approach should ideally be twofold: an offensive strategy to help generate an appropriate return, and a more defensive approach to risk management,” comments Alexei Tchernitser, Director Analytics Solutions, Quantifi.
For LDI managers, Quantifi provides sophisticated valuation and risk analytic tools to help them better manage liability risk, make the right investment decisions, and satisfy regulatory requirements. Key features of the Quantifi solution include comprehensive risk analysis and hedge effectiveness, powerful curve-building, cash flow matching, flexible scenario analysis, and an integrated view of assets and liabilities. In addition, Quantifi applies the latest technology innovations to provide new levels of usability, flexibility, and ease of integration. Quantifi’s solution for LDI makes it easy for firms to achieve their funding targets while successfully navigating business, market and regulatory change.
“Having access to smart technology is very valuable for firms that need to manage asset-liability risk. The challenge is that numerous LDI managers have legacy technology systems that are not built to support today’s more sophisticated strategies. These firms are turning to modern technology solutions, such as Quantifi, that are designed to allow firms to make better matching and hedging decisions by being able to perform cash flow projections, on-demand sensitivity analysis and create customised scenario analysis,” comments Rohan Douglas, CEO, Quantifi.